Recent IPO scams have not only highlighted how susceptible Indian markets are to manipulations but they have also exposed the loopholes in the system. They are a real cause of concern for the genuine investors.
The Sensex rise is not a cause for worry or concern. Stock market movement is orderly.
Despite repeated assurances from the Sebi chief and the Finance Minister that there was nothing to worry in the present bull-run, the Indian stock market once again witnessed the horror of scam. This time around, it was the primary market that was targeted and like on previous occasions, it is the retail investor who was defrauded when the market was at its peak.
Post-2003, the Indian stock market was in an upward mode, except for a few corrections in 2004 and 2005. In fact, the year 2005 is a landmark in the history of Indian stock market as the Sensex touched dizzying heights, witnessing a sharp increase of 40% in just one year. The primary market also was full of activity, as companiesbig and smallflocked to market to raise huge amounts of money to fund their growth plans. Almost all the IPOs had good response as most of them were oversubscribed, that too at the cut-off price.
This ongoing boom in the market seems to have awakened the fraudsters from slumber who targeted the primary market to make easy millions. Sebi unearthed a big scam going on behind the scene in which the scamsters opened a number of benami accounts-accounts in the names of fictitious people - to corner large number of shares. When shares were allotted to these accounts, they sold it on the first day of the listing to make profits (IPOs getting listed at a premium was reasonably assured, as seen in recent months). Market players were shocked to realize that a person can have as many as 6,315 demat accounts. Even more shocking was the fact that they escaped the detection of intermediaries when they subscribed for the IPOs.
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